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Associated Press
Gov. Tom Corbett delivers his budget address for the 2014-15 fiscal year Tuesday to a joint session of the Pennsylvania House and Senate in Harrisburg.

Associated Press
Gov. Tom Corbett delivers his budget address for the 2014-15 fiscal year to a joint session of the Pennsylvania House and Senate on Tuesday as Speaker of the House of Representatives, Rep. Sam Smith, R-Jefferson, and Lt. Gov. Jim Cawley look on.

HARRISBURG - The state budget unveiled by Gov. Tom Corbett on Tuesday would generate new revenue by leasing more state forest and park land for gas drilling, create a new state block grant for school districts, delay the full impact of a public pension cost spike and keep state income and sales taxes at current rates while continuing the phaseout of a business tax.

The $29.4 billion General Fund budget that goes to state lawmakers for approval by a June 30 deadline increases spending by $925 million, or 3.3 percent, from the current year. It calls for the phaseout of the Capital Stock and Franchise Tax by 2016.

The Republican governor is relying on various strategies to bring in new revenue to offset higher costs for public pensions and medical assistance that threaten to put the fiscal 2014-15 budget out of balance.

But increases in existing state taxes or a new state severance tax on natural gas drilling are not among them.

Instead, Corbett proposes to bring in $75 million in new revenue annually from additional state park and forest land drilling.

The leasing would allow gas companies operating on parcels of privately owned land adjacent to or within a state forest or state park to drill underground to tap Commonwealth-owned subsurface gas deposits, Patrick Henderson, the governor's energy executive, said.

The drilling would not disturb the land surface or habitat of a state park or state forest, he said. It would involve leasing scattered parcels instead of the concentrated acreage leased out to drillers between 2008 and 2010.

In 2010, former Gov. Ed Rendell issued an executive order banning additional leasing of state park and forest land for drilling. Corbett plans to issue a new executive order to prohibit leasing that disturbs land surfaces, Henderson said.

"We have a fair number of instances out there where there is private development on a private property that abuts state forest land," Henderson said. "It makes sense for the Commonwealth to realize that revenue."

For the second year, the state agency that manages state forests and parks would be dependent on oil and gas royalties for the majority of its operating funds. The Department of Conservation and Natural Resources would receive $27 million from the general fund, down from $30 million this fiscal year. The department would get $50 million in lease and royalty payments under the governor's proposed budget.

Cindy Dunn, president of environmental advocacy group PennFuture, said relying on gas royalties for state agencies' operating budgets means placing "more and more of the budget burden on the backs of public lands."

"We the public own the mineral rights," she said. "How and when we spend them is really a very public decision and shouldn't be frittered away on general operating budgets."

The governor's budget would also completely cut the $2.25 million Heritage Parks program that funds a dozen historical and cultural areas around the state, including the Lackawanna Heritage Valley and the Endless Mountains Heritage Region.

Corbett also proposes cutting Pennsylvania's contribution to the Delaware River Basin Commission by more than half, reducing it from $934,000 to $434,000. Spokesman Clarke Rupert said Pennsylvania funds 25 percent of the commission's budget, keeping with a tacit agreement that dates back to 1988.

"This certainly did catch DRBC staff by surprise," he said. "We'll have to have a lot of interaction with our commissioners to determine what their priorities are."

The Department of Environmental Protection would see its budget increase by $10 million in general revenue funds.

The drilling proposal brought a quick reaction from Democratic lawmakers.

Lawmakers will find out what no-impact leasing means at the upcoming budget hearings, said Sen. John Yudichak, D-14, Nanticoke, ranking Democrat on the Senate Environmental Resources and Energy Committee.

"We are going to investigate it thoroughly," he said.

"He (Corbett) wants to lease more state land for gas drilling, but he refuses to consider a fair severance tax on the companies that are drilling under that land," House Minority Leader Frank Dermody, D-33, Allegheny County, said.

Corbett provided a new twist to the contentious debate over state education funding with a proposal to create a "Ready to Learn" block grant funded at $341 million. He would keep funding the same for the basic instruction subsidy, the main channel for state education aid to school districts.

Districts could use this block grant for programs to make students ready to read and do math by third grade, provide STEM (Science, Technology, Engineering and Math) programs and to train teachers. The decade-old Accountability Block Grant that districts have used to pay for full-day kindergarten and early learning programs would be folded into the new block grant.

Another $1 million would go to high-performing school districts that help struggling school districts to use best academic practices.

This block grant closely mirrors an abortive proposal made by Corbett last year to use revenue from the sale of state liquor stores for a school district block grant, according to the House Democratic Appropriations Committee.

The governor wants to address a spike in public pension costs by temporarily lowering the minimum amount that state government and school districts would pay through the employer contribution next year for public pensions for employees.

The resulting savings of $130 million for school districts and $170 million for state government can be redirected for other purposes, officials said.

Corbett called on lawmakers to enact legislation this spring to reduce pension costs for new state government and school district employees.

The focus should be on reducing pension benefits for new hires while keeping pensions for current employees intact, House Majority Leader Mike Turzai, R-28, Pittsburgh, said.

"We need to abide by those agreements," he said.

The governor's budget reflects an expansion of the Lottery to include keno, Budget Secretary Charles Zogby said.

The administration believes it can add keno on its own authority, but lawmakers will study the lottery law to determine if legislative approval is needed, Senate Majority Leader Dominic Pileggi, R-9, Chester, said.

State Attorney General Kathleen Kane would receive level funding under the governor's proposal for her programs to deploy a mobile street crime unit to fight neighborhood crime as she has done in Hazleton, deploy drug strike task forces and operate a special unit to intercept child predators.

The budget includes $13.7 million to fund the training of 350 new state troopers, a priority of State Police Commissioner Frank Noonan who needs to fill vacancies as veteran troopers retire.

Corbett proposes a $1.8 million cut for that Municipalities Financial Recovery Loan Fund that helps Act 47 municipalities and level funding for an early intervention program for distressed municipalities.

The governor would provide funding so county public assistance offices can hire more caseworkers.

The House and Senate Appropriations Committee are scheduled to start hearings Monday on the budget.

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